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Anant Raj Ind.: Sluggish nine months - Views on News from Equitymaster

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Anant Raj Ind.: Sluggish nine months
Feb 3, 2010

Performance summary
  • Topline grows 17% YoY during 3QFY10; 6% YoY during the nine month period. Growth is led by a significant jump in rental income as well as the company’s real estate business where sales grow by 10% YoY during the quarter.
  • Operating margins remain flat over 3QFY09.
  • Net profits excluding extraordinary gains grow just 1% YoY during the quarter owing to higher depreciation costs and a 30% YoY fall in other income. Profits grow 4% YoY during 9mFY10.


Financial performance snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Sales 706 826 17.0% 2,376 2,522 6.2%
Expenditure 54 63 15.6% 220 200 -9.3%
Operating profit (EBDITA) 652 764 17.1% 2,156 2,323 7.7%
Operating profit margin (%) 92.3% 92.4%   90.7% 92.1%  
Other income 168 117 -30.6% 439 408 -7.0%
Interest 2 0   5 1  
Depreciation 21 43 108.7% 61 123 101.0%
Profit before tax 797 837 4.9% 2,530 2,607 3.1%
Tax 136 166 22.2% 515 521 1.3%
Extraordinary gain/(loss) 0 (0)   3 11  
Profit after tax/(loss) 662 671 1.4% 2,018 2,097 3.9%
Share of minority interests - 1   - 2  
Net profit 662 670 1.2% 2,018 2,095 3.8%
Net profit margin (%) 93.7% 81.2%   84.9% 83.1%  
No. of shares       294.7 294.7  
Diluted earnings per share (Rs)*         7.3  
P/E ratio (x)*         18.1  
* On a trailing 12 months earnings

What has driven performance in 3QFY10?
  • The 17% YoY growth in Anant Raj’s net sales during 3QFY10 was a result of a good performance of the company’s rental income which grew by 115% during the quarter (and contributed 16.4% to the company’s topline). The overall real estate business division, including the rental income and sale of real estate investments saw growth of 10% YoY in topline during the quarter.

    Segment-wise performance
    (Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
    Ceramic Tiles
    Revenue 28 13 -53.1% 128 61 -52.6%
    % share 3.2% 1.4%   4.6% 2.1%  
    PBIT margin 3.8% -109.5%   -6.1% -71.3%  
    Real Estate/Investments
    Revenue 846 929 9.9% 2,687 2,870 6.8%
    % share 96.8% 98.6%   95.4% 97.9%  
    PBIT margin 94.5% 91.7%   94.6% 92.1%  
    Total
    Revenue 874 943 7.9% 2,815 2,931 4.1%
    PBIT margin 91.5% 88.9%   90.0% 88.7%  

  • The company’s other business of ceramic tiles (1.4% of total sales) recorded a fall in sales of 53% YoY during the quarter. Its contribution to the overall business, however, remains minimal. The performance of the ceramic tiles business remains vulnerable to the growth of housing and construction industry.

  • The operating margins of the company saw a marginal change during the quarter.

  • Anant Raj’s net profits grew at a pace of just 1.4% YoY during 3QFY10. The reasons for the slower growth as compared to the topline was a significant 31% YoY fall in other income as well as a near doubling of the company’s depreciation charges during the quarter.

What to expect?
At the current price of Rs 132, the stock is trading at a multiple of 7.4 times our FY12 earnings estimates. Going by its 9mFY10 performance, the company has so far underperformed our estimates for the full year FY10. However, considering the lumpiness of the company’s business, there is still potential for the company to pick up pace during the last quarter of FY10. At current levels though, we remain positive on the stock from a 2 year perspective.

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